Weekly Market Recap
We come from a land down under(employed)
Week in review
- Australian employment declines by 146,300
- Australia business confidence improves to -5.3
- U.S. CPI inflation for August was 5.3%
- U.S. Federal Reserve meeting
- RBA minutes of September policy meeting
- September preliminary PMIs for U.S and Eurozone
Thought of the week
Another month, another surprise labour market report, this time for Australia. The unemployment rate declined another 0.1%pts in August to 4.5%, the lowest since 2008, despite the 146,300 drop in those classified as being employed. Similar to the recent U.S. experience, the unusual jobs numbers are a function of the supply of labour. Unsurprisingly, lockdowns make job search difficult, and even those that are technically still employed but working zero hours can be classed as no longer being part of the workforce. The result is a decline in the supply of labour, or a falling participation rate, which can lead to a decline in the unemployment rate, even as employment declines. Broader measures of the labour market, such as the underemployment rate, are a better indicator of labour market slack. As restrictions are lifted the participation rate will rise again and the unemployment rate will experience a modest lift in the months ahead.
The underemployment rate better reflects the jobs market
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